The Top 7 Web3 Concepts

Thank you for reading my latest article The Top 7 Web3 Concepts.?

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Let’s start at the beginning - Web1 arrived first - this was the initial incarnation of the internet we are now all familiar with - but a read only version! Next came the ‘social web’ - Web2 heralded the arrival of social media. With Web2 you can read and write, so you could go to a place like Twitter to read content as well as posting and creating your own content. Web2 is centralized around a handful of huge organizations such as Amazon, Google, Microsoft, Meta, TikTok and Twitter. In this model we need to hand over some information in return for having an account to use these services.

With Web2, everytime you create and publish content it’s actually the aforementioned corporations which own this content, and often controlled by governments who set out the regulations. This allows them to generate revenue from advertising, derive and monetize insights from the personal information they harvest, as well as deciding who has (and doesn’t have!) access to their platforms. In this model then, the drawbacks for consumers are clear.

Web2 came together as it was the quickest and simplest way to build network infrastructure – someone pays to install servers and set up software on them, and then either charges us to use it or lets us use it for free, as long as we abide by their rules. This has then led to a shift towards something called Web3. Web3 is centered around three specific pillars - decentralization, ownership and participation.?

If web1 was reading, web2 was reading and writing then web3 is about owning a piece of the things you create.

Web3 is all about breaking down Web2’s one-sided design through decentralization and Blockchain is a big part of this trend. The premise behind Web3 is that consumers now become creators, actually owning virtual assets within a decentralized digital world. The democratization of the web ensures that no one person, organization or government can have control over large amounts of data. It is the removal of the kill switch.

With web3 there is a big difference where people - including my own children - have grown up with games like Roblox or Minecraft where they can get a new level of access into an immersive world to build and create things within the games using the tools provided. Minecraft has been around for some years, but now it has a new lease of life in the web3 era where people are actually building businesses within the game.

1.Smart Contracts and NFT

What are NFTs? NFT is short for Non-Fungible Token. There you go.?

Still none the wiser? Sorry, of course “Non-fungible” more or less means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. But a one off piece of artwork stored digitally however cannot be exchanged for the same thing - this is non-fungible.

NFTs can really be anything digital (such as drawings, music, your brain downloaded and turned into an AI), but a lot of the current excitement is around using the tech to sell digital art. More about that later!

The transfer of these NFTs or digital goods and services on the blockchain is underpinned by an electronic version of a ‘promise’ known as a smart contract.

Smart contracts were first described by Nick Szabo in the 1990s as “a set of promises specified in digital form”. In practical terms this looks like a rule actioned autonomously by software when a certain condition is met. An example could be when the price of a stock hits $100 then sell it, or, if the temperature dips below 10 degrees then order a heater from Amazon.

NFTs are minted through smart contracts that assign ownership and reassign it when transferred or resold. At a basic level, smart contracts act as a tool to implement a sale agreement.

Ok, so now we know a little about NFTs and smart contracts. But how do they work in the real world? And for that we need an example, so let’s get back onto digital art!

One of the main reasons NFTs are taking off in the art world is down to how NFT artists can work, create new projects, and take ownership of their art. As an artist you do your thing but register it on the blockchain, which creates a unique digital asset, and as we've already learnt this is the NFT.

Acclaimed digital artist Mike Winklemann, better known as Beeple, created a record when his single piece artwork titled ‘Everydays – The First 5000 Days’ sold for USD 69.3 million at a Christie’s auction on 11 March 2021. The artwork is so named because it is a collage of 5,000 individual images made one per day over more than thirteen years from 2007 to 2020 by Beeple. At 69.3 million it's a $15 million premium over Monet’s painting of Waterlilies!?

But it gets even crazier! You can copy a digital file as many times as you want, including the art that’s included with an NFT. Think of this as the equivalent of having a physical print of an original painting - only one person can ever own the original. Crucially it's the ownership of the work the NFT protects. Buried within the OG NFT is a piece of code which identifies the original piece of work, any copies will be just that - a copy, and the system is designed to deal with this. It’s worth noting that the artist can still retain the copyright and reproduction rights, just like with physical artwork too.

2. Blockchain

The catalyst behind Web3 was in many ways driven by the advent of Blockchain technology. Blockchain is a relatively new method of storing data online, which is built around the two core concepts of encryption and distributed computing.?

The Blockchain technology applies encryption in a way which ensures only the person which owns the asset has the ability to access it regardless of who owns the computer the data resides on, whether that be an organization or a government. If you’re familiar with Crypto currencies such as Bitcoin then this concept should sound familiar as Bitcoin is powered by Blockchain behind-the-scenes.

The distributed computing element ensures that the data is shared between many computers or servers. This results in more than one copy of the original data. Not only does this provide redundant copies in the event of a hardware failure or disaster (such as fire or flood), it also allows the Blockchain technology to check if one particular copy of the file doesn’t match the others. This adds another layer of protection to ensure that whoever is in control of one copy of the file cannot change it without the permission of the person and without the knowledge of the entire distributed network.

When you democratize anything there are always new challenges and questions to be addressed. The democratization of data for example needs to ensure the organization has a reasonable level of maturity when it comes to data along with some oversight or governance to keep things on the right track. Web3 is no different.

3. DAOs

Thinking about governance brings us to the next concept on the list - the Decentralized Autonomous Organization or DAO. This concept is a collective term for a group or organization which are bound by rules and regulations baked into a blockchain.

In their purest form, DAOs are groups that form for a common purpose, like investing in start-ups or buying a bunch of NFTs. DAOs are essentially a governing body which aim to oversee the allocation of resources tied to the projects they are associated with. They are also tasked with ensuring the long term success of the project they support.

Once it’s formed, a DAO is run by its members, often through the use of crypto tokens. These tokens often come with certain rights attached, such as the ability to manage a common treasury or vote on certain decisions. Those with a stake in a DAO then get voting rights and may influence how the organization operates by deciding on or creating new governance proposals.

DAOs are still relatively new, and although the concept is gaining traction there are still some crucial implications which need to be worked through. DAOs for example can span multiple jurisdictions so there’s no all encompassing legal framework for them to operate in.

4. The Metaverse

The metaverse is touted as the next evolution of the internet’s user interface through which users communicate, interact, share data and connect in the online world. It aims to provide an experience so immersive it blurs the lines between the physical and virtual worlds. It’s a term that surprisingly was developed some time ago. Back in 1992 to be exact, in a book by Neal Stephenson called ‘Snow Crash’. Since then movies such as the Matrix, and more recently Ready Player One have played with the theme of users being immersed within a virtual world, rather than being stuck on outside of it.

The metaverse is now less science fiction and beginning to move towards reality fuelled in no small way by Facebook, who even changed their name to Meta as part of a huge investment as part of a strategy to go all in on the metaverse concept. Founder of Meta, Mark Zuckerberg aims to bring this concept to reality. Zuckerberg felt that this was the time to jump onboard for the ride due to technologies such as virtual reality reaching a tipping point of maturity. Meta actually purchased a VR hardware company called Oculus for $2 billion as far back as 2014 to kick start their metaverse journey.

Meta has recently attracted some unwanted attention from the Federal Trade Commission (FTC), although this is mainly for their approach of trying to corner the market by spending their way to the top through acquisition of technologies and talent, rather than attempting to build their own technology themselves.

One thing which everyone tends to agree on is that in the metaverse you are represented by an avatar. This gives the user the sense of being “in” the metaverse. These avatars may take a 3D human form and even look like a digital representation of the user. Within a game it could be almost anything you can think of! Another important principle is that you can move through the metaverse seamlessly, and regardless of platform you are on, laptop, ipad, mobile phone - you can pick up where you left off.

5. Blockchain Gaming

Blockchain games are video games that have their underpinnings powered by cryptocurrency, smart contracts, and NFTs. It is also known as Web3 games, Play-to-Earn (P2E) games, or cryptocurrency games. Within the games NFTs are meant to be used for in-game items such as clothing, gear, and weapons for example. However, they could also power a crypto-based game economy.?

As we discussed in the Web3 section about democratization the ownership elements are critical for a Blockchain-based game. In-game assets, or in-game currencies, are owned by players, which are traded in exchanges and markets., and currencies are all examples of in-game assets. There is also an element of collectibility, as players hold onto their digital objects.???

Established gaming companies like Sega, Square Enix, and Ubisoft are set to launch wallets with NFTs incorporated into blockchain games over the next few years. While web3-native companies like Gala Games, Mythical Games, and Animoca Brands will become a part of the next-generation gaming.?

Web3 had a rough year in 2022, as cryptocurrency prices plunged in midst of macroeconomic upheaval, war in Ukraine, COVID-19 pandemic fallout, and an impending economic downturn. 2022 also saw the rise (and fall) of a traditional game - Minecraft re-imagined with a blockchain backend allowing users to build and create items in the game before trading them with crypto currency - essentially incentivising users for their time and effort. ‘Critterz’ ultimately was banned by Minecraft’s owners Mojang deciding that it wouldn't allow NFT integrations with Minecraft.

As you can see, Blockchain gaming is a rapidly evolving space, with bedroom start-ups competing with the big boys for potentially huge rewards for those who are able to successfully navigate this uncertain landscape.?

6. Revamping Social Media

Make no doubt about it that it’s not just Facebook exploring how to jump aboard the NFT bandwagon. It’s adapt or die in the uber competitive world of social media where the competition for eyes and time on their platform is paramount to securing lucrative ad space deals.

Creators on Instagram will soon be able to create their own NFTs and sell them both on and off the platform. They’ll have an end-to-end toolkit — from creation and showcasing, to selling. People can easily support their favorite creators by buying their digital collectibles directly within Instagram.

In an integration Twitter has called NFT Tweet Tiles, users will be allowed to buy, sell, and showcase NFTs through tweets. The feature, which is still being tested, has an enlarged panel for displaying an NFT artwork and offers a click-through button to marketplace listings.

YouTube has also indicated that they will incorporate NFTs into their revenue model for creators in the near future.

7. Decentralized finance DeFi

Traditionally financial systems have required a ‘middleman’ such as a bank or broker who act as an intermediary between buyer and seller. This operating model adds complexity, cost and delays into the financial system. It also means these organizations have a huge element of control over the entire financial system. Decentralized finance (DeFi) is an alternative finance system which is built on blockchain technology without the need for a central authority or intermediaries.?

A few examples of DeFi applications are:

• Exchange platforms: This allows users to trade cryptocurrencies and other digital assets in a decentralized manner, using smart contracts to facilitate the exchange of value.
• Lending and borrowing platforms: These platforms allow users to lend and borrow digital assets, often using smart contracts to automate the process.
• Payment platforms: These platforms allow users to make payments using cryptocurrencies or other digital assets, often with lower fees and faster transaction times than traditional payment methods.
• Stablecoins: These are digital assets designed to maintain a stable value relative to a specific asset, such as the US dollar. They can be used to facilitate transactions and reduce volatility in the cryptocurrency market.
• Prediction markets: These are platforms that allow users to bet on the outcome of future events, using smart contracts to facilitate the process and ensure fair outcomes.
• Insurance: These are platforms that allow users to purchase insurance policies using digital assets, often with lower fees and faster processing times than traditional insurance companies. Automated claims processing and reduced paperwork are also benefits over the traditional model.

There are many advantages to be gained from DeFi, but there are challenges and trade-offs to be considered. Given that DeFi is mostly unregulated, it is a magnet for fraud and money laundering and lacks consumer safeguards that exist in traditional finance. In 2021, for instance, more than $10 billion was lost to DeFi scams, according to research from Elliptic, a blockchain analytics firm.

The sheer number of companies and use cases looking into how to leverage DeFi is a positive sign and shows that there’s potential in this area. The open source nature of the DeFi encourages innovation, and there are many talented people—academics and practitioners alike—working on these challenges. If they can find solutions without undermining the unique properties at the core of DeFi, it could become an important building block for the future of finance.

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About Adam Morton

Adam Morton is an experienced data leader and author in the field of data and analytics with a passion for delivering tangible business value. Over the past two decades Adam has accumulated a wealth of valuable, real-world experiences designing and implementing enterprise-wide data strategies, advanced data and analytics solutions as well as building high-performing data teams across the UK, Europe, and Australia.?

Adam’s continued commitment to the data and analytics community has seen him formally recognised as an international leader in his field when he was awarded a Global Talent Visa by the Australian Government in 2019.

Today, Adam works in partnership with Intelligen Group, a Snowflake pureplay data and analytics consultancy based in Sydney, Australia. He is dedicated to helping his clients to overcome challenges with data while extracting the most value from their data and analytics implementations.

He has also developed a signature training program that includes an intensive online curriculum, weekly live consulting Q&A calls with Adam, and an exclusive mastermind of supportive data and analytics professionals helping you to become an expert in Snowflake. If you’re interested in finding out more, visit www.masteringsnowflake.com.